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Before the
Federal Communications Commission
Washington, D.C. 20554
In re: )
)
DJS PRODUCTIONS, )
)
Petitioner,)
)
v. )
) CSR-4577-L
MULTIMEDIA CABLEVISION, INC., )
)
Respondent,)
)
Petition for Special Relief )
For Commercial Leased Access )
MEMORANDUM OPINION AND ORDER
Adopted: August 5, 1996 Released: August 15, 1996
By the Chief, Cable Services Bureau:
INTRODUCTION
1. DJS Productions ("DJS") has filed the captioned petition for relief alleging that
Multimedia Cablevision, Inc. ("Cablevision") has violated Commission rules which prescribe the
method by which the maximum commercial leased access rates that a cable operator may charge
an unaffiliated programmer are calculated. Cablevision filed a response.
BACKGROUND
2. The statutory framework for commercial leased access was established by the 1984
Cable Act and subsequently amended by the 1992 Cable Act. The Congressional purpose
initially underlying the provision of commercial leased access to assure that unaffiliated cable
programmers could gain access to the channel capacity of cable systems free from the editorial
control of the cable operator. The 1992 Cable Act both broadened the initial statutory purpose
to include the "promotion of competition in the delivery of diverse sources of video
programming" and provided the Commission with expanded authority to establish: (1) maximum
commercial leased access rates; (2) reasonable terms and conditions for leased access; and (3)
procedures for expedited complaint resolution. In order to implement Congress' grant of
expanded authority, the Commission promulgated regulations applicable to leased access channels
in its proceedings in Implementation of Sections of the Cable Television Consumer Protection and
Competition Act of 1992; Rate Regulation, MM Docket 92-266 (the "Rate Order"). Recently,
the Commission clarified certain issues with respect to the commercial leased access regulations
in its Order on Reconsideration, MM Docket 92-266 (the "Recon. Order).
3. In the Rate Order, the Commission adopted the "highest implicit fee" formula as
the method by which maximum commercial leased access rates would be calculated and also
adopted standards governing both leased access terms and conditions and dispute resolution. In
the Recon. Order, the Commission clarified certain issues with respect to the application of the
highest implicit fee methodology. Specifically, the Commission determined that, in calculating
the implicit fee; program license fees (if any) should be deducted from the average subscriber
revenue; the implicit fee for each must-carry broadcast signal channel and public, educational,
and governmental ("PEG") access channel should not be considered for purposes of calculating
the highest implicit fee; the highest implicit fee should be calculated on a tier-by-tier basis; any
programming revenues received by the operator from an unaffiliated programmer, such as those
associated with direct sales or home shopping, should not be included in the calculation of the
highest implicit fee; and, for leased access programming on either the basic service tier ("BST")
ar the cable programming services tier ("CPST"), the highest per-subscriber implicit fee should
be multiplied by the number of current subscribers who actually subscribe to the tier on which
the leased access channel will be placed and, for leased access programming on a per-channel
or per-event basis, the highest per-subscriber implicit fee should be multiplied by the average
number of subscribers that subscribe to the cable operator's premium services.
4. Section 76.970(b) of the Commission's regulations states that the maximum
commercial leased access rate that may be charged by a cable operator is the "highest implicit
net fee charged any nonaffiliated programmer (excluding leased access programmers) within the
same category." Section 76.970(c) provides that the implicit net fee is calculated by
determining the price-per-channel each subscriber pays the operator minus the amount-per-
subscriber the operator, in turn, pays the programmer. The resulting difference is then
multiplied by the number of subscribers able to receive the unaffiliated programmer's service.
The Commission has determined that the implicit fee for leased access may not include fees,
stated or implied, for services other than the provision of channel capacity. Maximum
commercial leased access rates for lease periods shorter that one month can be calculated by
prorating the monthly maximum rate.
SUMMARY OF PLEADINGS
5. DJS, in its petition, states that it sought to enter into an agreement with
Cablevision to lease a 24-hour channel on Cablevision's cable system serving Batavia, Illinois.
DJS asserts that Cablevision's Batavia system offers a BST consisting of 44 channels and that,
as of July 24, 1995, the cable system had 5,922 subscribers. DJS further asserts that
Cablevision's monthly BST rate is $20.99. Based upon that information, DJS calculated an
implicit fee of $0.477 per channel and a maximum commercial lease rate of $33,898. DJS
complains that Cablevision sought to impose a higher lease rate of $44,061.50, including a
$261.50 "set-up" fee, in violation of the maximum commercial leased rate methodology
prescribed by the Commission.
6. Cablevision responds that it reviewed the contract with DJS for the lease of a 24-
hour channel on its Batavia system and concluded that the rate quoted therein was indeed
inaccurate. However Cablevision concluded that the inaccuracy was in DJS' favor. Cablevision
recalculated the leased access rate and determined that the original rate quote of $44,061.50 was
"too low" and that the correct leased access rate it should have charged DJS was $48,820.92.
Cablevision attributed the difference in the leased access rates to an error in calculating the
"average home shopping per subscriber compensation." Cablevision states that, initially, it
included an average home shopping subscriber compensation of $0.14 when, in actuality, that
compensation should have been $0.21. In addition to correcting its average subscriber
compensation, Cablevision states that it updated data regarding the number of BST channels and
the number of subscribers to reflect 45 channels and 5,960 subscribers, respectively. Cablevision
then made the following calculations to determine the maximum commercial leased access rate
applicable to DJS:
$20.99 (BST rate) ö 45 (BST channels) = $0.466
$0.466 + $0.21 (average home shopping subscriber compensation) = $0.676
$0.676 5,960 (subscribers) = $4,028.96 (monthly lease rate)
$4,028.96 12 months = $48,347.52 (annual rate)
DISCUSSION
7. The central question to be resolved in this proceeding is whether Cablevision erred
when it included revenue derived from the sale of products on home shopping channels in
calculating the leased channel "implicit fee" rate. This issue has been addressed and resolved by
the Commission, as noted above, in its Recon. Order. In the Recon. Order, the Commission
determined that "revenues received by the operator from an unaffiliated programmer, as opposed
to programming costs paid by the operator to the unaffiliated programmer, should not be included
in the highest implicit fee calculation." Cablevision, in its response, makes it clear that it
included such revenues, what it terms "average home shopping per subscriber compensation," in
its calculation of the maximum leased access rate applicable to DJS. In light of the foregoing
discussion, we find that Cablevision's inclusion of programming revenues is in contravention of
the correct application of the highest implicit fee formula.
8. To determine the permissible leased access rate, the per-subscriber implicit fee in this
instance should be multiplied by the actual number of subscribers on the tier on which the leased
access programming is to be placed. In the instant case, the pleadings do not make clear
whether DJS' programming is to be placed on Cablevision's BST or CPST. Moreover, because
DJS states that there are 5,922 subscribers in Cablevision's Batavia "system," it is unclear
whether the number of subscribers used in calculating the maximum commercial leased access
rate includes only subscribers to a single tier of service or represents the total number of
subscribers in Cablevision's system serving Batavia. For these reasons, we cannot determine the
correct maximum commercial leased access rate applicable to DJS. However, we expect
Cablevision to take the distinctions herein noted into consideration when it calculates a new
maximum commercial leased access rate.
ORDERING CLAUSE
9. Accordingly, IT IS ORDERED that Multimedia Cablevision, Inc. shall, to the
extent its current practices in calculating maximum commercial leased access rates are not in
compliance with our rulings herein, within 20 days from the effective date of this Order, establish
a commercial leased access rate applicable to DJS, in accordance with Section 76.970 of
Commission rules, as amended.
10. This action is taken pursuant to authority delegated by Section 0.321 of the
Commission's rules, 47 C.F.R. 0.321.
FEDERAL COMMUNICATIONS COMMISSION
Meredith J. Jones
Chief, Cable Services Bureau